Avoid expensive mistakes in your tax return

During the general election campaign the spending pledges of all the political parties, including the Conservatives, were funded in part by a promised crackdown on tax avoidance and evasion. The new government will achieve part of this by closing loopholes. But HM Revenue & Customs will also be expected to increase the amount recovered in tax, interest and penalties through enquiries into self-assessment tax returns. And HMRC can gather information from third-party sources including banks, insurers, the Land Registry and NHS trusts to compare them with tax returns.

Although GPs are not often investigated, penalties can be up to 100% of the tax on undeclared sums, so take these steps to avoid getting caught out.

1 Scrutinise payments to friends or family members

It’s legitimate for a GP practice or an individual GP to pay a family member for work in the business. But make sure that payments are at a reasonable commercial rate for the time and expertise, and PAYE and pension regulations are followed.

2 Check what you can claim if you use your home as an office

HMRC permits you to claim a flat rate based on the number of hours worked from home each month. Working from home for between 25 and 50 hours has a rate of £10 a month; working between 51 and 100 hours permits £18 a month; and working 101 or more, £26 a month.

It’s also possible to claim based on whether you have a specific room set aside, calculating a percentage of total household costs, and taking account of both the size of the office in relation to the house, and the time spent using it. But the average GP is unlikely to spend more than two or three hours a day working from home, so I would recommend you consider the flat rate claim.

3 Voluntarily disclose any errors

Discuss any errors in declaring income with your financial adviser so that a voluntary disclosure can be made and penalties minimised. Penalties are determined by the size of the tax understated, but the regime distinguishes between errors and deliberate behaviour, and penalties can be reduced if there is voluntary disclosure. A deliberate failure to declare can result in up to a 100% penalty, whereas this can be reduced or eliminated if you declare voluntarily.

Luke Bennett is a partner at Francis Clark LLP and a committee member of the Association of Independent Specialist Medical Accountants